Question

All of the following statements concerning deferred income taxes are true except:

Group of answer choices

A) Differences in income calculated for financial reporting purposes and for tax reporting purposes are largely a result of the different goals of the two systems.

B) Current and deferred tax liabilities are based on current tax rates and should not give consideration to changes in enacted tax rates.

C) Temporary differences in financial reporting and tax reporting result in deferred taxes.

Answer 1

Correct Answer is (B) Current and deferred tax liabilities are based on current tax rates and should not give consideration to changes in enacted tax rates.

The statement "Current and deferred tax liabilities are based on current tax rates and should not give consideration to changes in enacted tax rates" is false

Deferred tax assets and liabilities's calculations are made based on the tax rates that are expected to apply in the period when the asset gets realised or liability gets settled. Enacted or substantively enacted rates are used to calculate income tax amounts. Thus deferred tax liabilities give consideration to changes in enacted tax rates

Analysis of other statements:

(A) Differences in income calculated for financial reporting purposes and for tax reporting purposes are largely a result of the different goals of the two systems - This statement is true as in both tax sysytem and financial reporting system have different goals and purpose. Thus, there is  difference in income calculated for financial reporting purposes and for tax reporting purposes.

C) Temporary differences in financial reporting and tax reporting result in deferred taxes.-This statement is true as deferred taxes are result of Temporary differences in the financial reporting and tax reporting.

Thus, Statement (B) Current and deferred tax liabilities are based on current tax rates and should not give consideration to changes in enacted tax rates is false.